Interactive Investor

What’s the best fixed-rate account that pays monthly?

22nd May 2018 10:31

Ruth Jackson from interactive investor


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“In May 2015, I invested £10,000 in the National Savings & Investments (NS&I) Pensioner Bond, paying 4%. I know that my three-year bond will mature soon, but I’m not sure what I should do with the money. I need an account that pays a monthly income. Where can I get the best possible interest rate?”

From: PT/York


NS&I’s 65+ Guaranteed Growth Bonds (also known as the Pensioner Bond) were one of the most successful savings accounts ever launched with almost 900,000 people investing more than £8.9 billion during the five months the accounts were on sale.

These accounts are now maturing, and all that money needs a new home. Unfortunately, it is impossible to match the 4% interest rate those accounts offered. NS&I is offering account holders a three-year account paying 2.2% that they can roll the contents of their Pensioner Bond into. But you can get a better rate elsewhere.

If you want another three-year fixed rate account, then the best rate you can get, with the option of monthly income, is 2.31% from RCI Bank.

But before you lock your money away for another three years, take the time to consider if a long-term fixed-rate account is still the best option for you. Might you need to access your cash before then? Metro Bank has an 18-month bond with an option to have the interest paid monthly. It pays 1.9%.

Also, what about tax? The personal savings allowance means you probably aren’t paying tax on the income you take from your savings (you can receive up to £1,000 a year before tax is due if you are a basic-rate taxpayer). But if you are paying income tax on your savings interest, consider moving your money into a Cash Isa, where it will be tax-free.

Aldermore has the best three-year fixed-rate Cash Isa, paying 1.8% interest, which can be paid monthly. Alternatively, you could opt for the Kent Reliance one-year Isa that pays 1.48% interest, which again can be paid monthly.

The best regular interest-paying accounts

Account type Provider Interest rate Notes
180-day notice account Secure Trust Bank 1.66% Interest is paid quarterly
One Year Fixed Saver Atom Bank 1.8% Interest can be paid monthly. Open in-app only.
Three Year Fixed Rate Cash Isa Aldermore 1.85% Interest can be paid monthly.
Three-year bond RCI Bank 2.31% French compensation scheme

Ruth Jackson is a personal fincance journalist. Find out who our experts are on the Ask the Experts homepage.

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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